COLOMBO, Oct. 13 -- The Reserve Bank of India (RBI) has permitted Indian banks to extend Indian rupee-denominated loans to customers in Sri Lanka, Bhutan and Nepal, a move expected to deepen regional financial integration and support economic recovery in neighbouring countries.

Under the new framework, Indian banks will be able to lend directly in rupees to individuals, businesses and financial institutions in these countries. Importantly, branches of Indian banks operating in Sri Lanka will also be allowed to issue INR loans to local banks and individual borrowers.

"This development will make credit more accessible for businesses in Sri Lanka," the Indian High Commission in Colombo said in a statement, welcoming the decision."The provi...